Archive for Fed Funds Rate
Is More Fed-Led Stimulus On Its Way?
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The Federal Open Market Committee released its April 2012 meeting minutes this week, revealing a Federal Reserve in the ready in the event additional monetary stimulus is needed.
The Fed Minutes function much like the minutes from a business meeting; or, condominium association meeting, for example. It’s a detailed review of the conversations and debates between FOMC members, and is typically published 3 weeks after a Federal Reserve meeting.
The Fed Minutes is a follow-up statement on the FOMC’s more well-known, post-meeting press release. It’s also much more lengthy.
Whereas the April 25, 2012 press release totaled 444 words, the Fed Minutes spanned 6,618.
Those extra words are important, too, because the detail offered within the Fed Minutes lends insight into how our nation’s central bank views the U.S. economy, its strengths and weaknesses, and its threats.
From the Fed Minutes, some of the Fed’s comments includes :
- On employment : Unemployment may remain elevated through 2014
- On housing : Tight underwriting is “holding down” the housing market
- On rates : The Fed Funds Rate should remain low until late-2014
There was also substantial talk about Europe and its role in the U.S. economy. Notably, U.S. financial institutions have been actively reducing their European exposure to contain damage in the event of a full-blown economic crisis abroad.
This has had the net effect of lowering mortgage rates in Wisconsin. Mortgage bonds often benefit from economic uncertainty.
In addition, because several Fed members acknowledged a willingness to add new stimulus to the U.S. economy, mortgage markets are accounting for the possibility it could happen. It’s unclear whether stimulus would be added after the Fed’s next meeting, or at some point later in the year, or at all.
The FOMC has its next scheduled meeting June 19-20, 2012.
What’s Ahead For Lake Geneva Real Estate Mortgage Rates This Week: April 30, 2012
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Lake Geneva real estate mortgage markets were mostly unchanged last week for the second straight week. Spain made few moves to allay concerns from its investors, the Federal Reserve did little to change its message on the U.S. economy, and newly-released economic data was in-line with expectations.
Conforming Wisconsin mortgage rates idled last week, remaining near all-time lows for the 30-year fixed rate mortgage, the 15-year fixed rate mortgage; and the 5-year ARM.
According to Freddie Mac’s weekly mortgage rate survey, last week’s mortgage rates, as averaged from more than 125 banks nationwide, were as follows:
- 30-year fixed rate mortgage: 3.88% with 0.7 discount points
- 15-year fixed rate mortgage: 3.12% with 0.6 discount points
- 5-year adjustable rate mortgage: 2.85% with 0.6 discount points
A discount point is a one-time closing cost and is equal to one percent of your overall loan size. This means that a mortgage applicant with a $100,000 mortgage and an accompanying 0.7 discount points would be responsible for paying an upfront charge of $700 at the time of closing.
Freddie Mac’s mortgage rates assume full closing costs, too.
This week, it’s unclear whether Lake Geneva mortgage rates will rise or fall.
There are few economic data points due for release so mortgage markets are expected to take their cues from Europe where there’s no shortage of story lines.
In Spain, there are protests over new austerity measures. In France, a new President may be elected — one whom opposes austerity. In the Netherlands, a new budget passed that includes austerity measures, but barely.
Each storyline generates uncertainty about the future of Europe and its unified economy. As the uncertainty grows, global investors seek safety in the U.S. mrotgage bond market, a move that helps mortgage rate shoppers. When demand for mortgage bonds is high, mortgage rates tend to improve.
Also affecting mortgage rates this week will be Friday’s Non-Farm Payrolls report.
The economy is expected to have added 165,000 net new jobs in April and the Unemployment Rate is believed to have remained unchanged at 8.2%. If there is a deviation from either of these expectations, mortgage rates will change. If the actual jobs data is stronger than Wall Street expectations, mortgage rates are likely to rise.
If the jobs report is weak, mortgage rates should fall.
The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday.
For the fifth consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.
The Fed Funds Rate has been near zero percent since December 2008. It is expected to remain near-zero through 2014, at least.
In its press release, the Federal Reserve noted that the U.S. economy has been “expanding moderately” since the FOMC’s last meeting in March. Beyond the next few quarters, the Fed expects growth to “pick up gradually”.
This key phrase will likely be repeated by the press. It suggests that the economy is no longer contracting; instead moving along a path of slow, consistent expansion.
In addition, the Fed acknowledged that “strains in global financial markets” continue to pose “significant downside risks” to long-term U.S. economic outlook. This is in reference to the sovereign debt concerns of Greece, Spain and Italy, and the potential for a broader European economic slowdown.
The Fed’s statement included the following notes:
- The housing sector remains “depressed”
- Labor conditions have “improved in recent months”
- Household spending has “continued to advance”
Also, with respect to inflation, the Fed said that the higher oil and gasoline prices from earlier this year will affect inflation “only temporarily”, and that inflation rates will return to stable levels soon.
At its meeting, the Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs. The Fed re-affirmed its intentions to hold the Fed Funds Rate at “exceptionally low” levels through late-2014, and to buy mortgage-backed bonds in the open market.
Immediately following the FOMC’s statement, mortgage markets improved slightly, pressuring Lake Geneva real estate mortgage rates lower in Wisconsin and nationwide.
The FOMC’s next scheduled meeting is a two-day event slated for June 19-20, 2012.
Tuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.
For the fourth consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member dissented in the 9-1 vote.
The Fed Funds Rate has been near zero percent since December 2008. It is expected to remain near-zero through 2014, at least.
In its press release, the Federal Reserve noted that the the U.S. economy has “expanded moderately” since the FOMC’s January 2012 meeting, adding that growth is occurring despite “strains in the global financial markets” that pose “significant downside risks” to long-term outlooks.
The Federal Reserve now expects moderate economic expansion through the next few quarters and a gradual easing in the national Unemployment Rate.
The Fed also noted that:
- The housing sector remains “depressed”
- Labor conditions have “improved further”
- Household spending has “continued to advance”
With respect to inflation, the Fed said that rising oil and gasoline prices will “push up” inflation temporarily, but not over the long-term.
At its meeting, the Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs. The Fed re-affirmed its intentions to hold the Fed Funds Rate at “exceptionally low” levels through late-2014, and to buy mortgage-backed bonds in the open market.
Immediately following the FOMC’s statement, mortgage markets worsened slightly, pressuring Lake Geneva mortgage rates higher.
The FOMC’s next scheduled meeting is a two-day event slated for April 24-25, 2012.
Federal Reserve Wary Of European Spillover
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The Federal Reserve has released the minutes from its 2-day meeting January 24-25, 2012.
The Fed Minutes is a summary of the conversations and debates that shape our nation’s monetary policy. It receives less attention than the Fed’s more well-known, post-meeting press release, but the Fed Minutes is every bit as important.
To rate shoppers in Delavan , for example, the Fed Minutes can provide clues about whether mortgage rates will generally rise or fall in the coming months.
The most recent Fed Minutes reveals a central bank divided on the future of the U.S. economy. The minutes show some Fed members in favor of new, immediate market stimulus. It shows others in favor of terminating the stimulus that’s already in place.
The Fed’s debate centered on the topic of inflation, and the pressures that a prolonged, near-zero Fed Funds Rate can place on the economy. Ultimately, the Fed did nothing, neither adding new stimulus nor removing that which is already in place.
It did, however, communicate a plan to keep the benchmark Fed Funds Rate rate “exceptionally low” through late-2014, at least.
The Fed Minutes included the following notes, too :
- On employment : Unemployment rates will “decline only gradually” in 2012
- On housing : The market is “held down” by the “large overhang” of distressed homes
- On inflation : Consumer prices have remained “flat”
Furthermore, the Fed expressed optimism regarding European financial markets, noting that market sentiment “appeared to brighten a bit”. Nonetheless, “spillovers” remain possible and the threat continues to weigh on markets.
Mortgage rates are slightly worse since the Fed Minutes were released.
The Federal Reserve’s next scheduled meeting is March 13, 2012 — its second of 8 scheduled meetings this year.
A Simple Explanation Of The Federal Reserve Statement (January 25, 2012)
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Wednesday, the Federal Reserve’s Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.
The Fed Funds Rate has been near zero percent since December 2008.
For the third consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member dissented in the 9-1 vote, objecting only to the language used in the Fed’s official statement.
In its press release, the Federal Reserve noted that the the U.S. economy has “expanding moderately” since its last meeting in December 2011, adding that the growth is occurring despite “slowing in global growth” — a reference to ongoing economic uncertainty within the Eurozone.
The Federal Reserve expects moderate economic expansion through the next few quarters but is wary of “strains” from global financial markets, and these three threats to the U.S. economy :
- The housing sector remains “depressed”
- The unemployment rate remains “elevated”
- Fixed business investment has “slowed”
On the positive side, the FOMC said that household spending is rising and inflation remains in-check. The group also believes that employment will gradually improve nationwide going forward.
The Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs.
Immediately following the FOMC’s statement, mortgage markets rallied, pressuring mortgage rates to fall in and around Williams Bay.
Mortgage rates remain near all-time lows and, for homeowners willing to pay points plus closing costs, conventional, 30-year fixed rate mortgages can be locked at below 4 percent. If you’re in the process of buying or refinancing a home in Wisconsin , it’s a good time to lock a mortgage rate with your lender.
The FOMC’s next scheduled meeting is a one-day event slated for March 13, 2012.
The Federal Reserve Meets Today : Mortgage Rates Expected To Move
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The Federal Open Market Committee adjourns from a scheduled 2-day meeting today, its first of 8 scheduled meetings this year.
The FOMC is a designated, rotating, 12-person committee within the Federal Reserve, led by Federal Reserve Chairman Ben Bernanke. Members of the FOMC sub-committee are the voting members of the Federal Reserve; the ones that ultimately determine U.S. monetary policy.
The most well-known Federal Reserve monetary policy tool is the central bank’s Fed Funds Rate. The Fed Funds Rate is the prescribed interest rate at which banks borrow money from each other for a period of one night.
The Fed Funds Rate can only be changed by FOMC vote.
For home buyers and would-be refinancing households in Delavan , it’s important to recognize that the Fed Funds Rate is an interest rate separate and distinct from “mortgage rates”. Mortgage rates are not voted upon by the Federal Reserve. Rather, mortgage rates are based on the price of mortgage-backed bonds, a security bought and sold among investors.
Historically, there is little correlation between the Fed Funds Rates and 30-year fixed rate mortgage rates throughout Wisconsin. Going back 20 years, the benchmark rates have been separated by as much as 5.29% and have been as near as 0.52%.
The spread has even gone negative, most recently in 1979 and 1981 — a period marked by high inflation.
Today, the separation between the Fed Funds Rate and the average, 30-year fixed rate mortgage rate is roughly 3.60%. Beginning at 12:30 PM ET, however, that spread is expected to change. The FOMC will make its statement to the press at that time, and will release its quarterly forecast to the markets.
As Wall Street reacts to the Fed’s press release and projections, mortgage rates will move.
Investors expect the Fed to vote the Fed Funds Rate unchanged from its current range near 0.000 percent, but are unsure of how the Fed will characterize the U.S. economy. If the Fed speaks optimistically on the economy, stock markets should rise and mortgage bonds should fall, driving mortgage rates higher.
Conversely, if the Fed shows concern for future economic growth, mortgage rates should drop. Either way, today figures to be volatile one for mortgage markets.
When mortgage markets get volatile, the safe play as a rate shopper is to lock your mortgage rate immediately. There too much risk in floating.
A Simple Explanation Of The Federal Reserve Statement (December 13, 2011 Edition)
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Tuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.
The vote was nearly unanimous for the second straight month. Just one FOMC member dissented in the vote, favoring additional policy stimulus beyond what the Federal Reserve currently provides.
In its press release, the Federal Reserve sais that the the U.S. economy is improving, noting that since its November 2011 meeting, the economy has been “expanding moderately”. The Fed also added that domestic growth is occurring despite some “apparent slowing in global growth” — a nod to ongoing uncertainty within the Eurozone.
The Federal Reserve expects a moderate pace of growth over the next few quarters, and believes that the jobs market will continue to improve, but slowly.
Other potential soft spots within the economy include :
- A slowdown in business investment
- A “depressed” housing market
- Strains in global financial markets
The Federal Reserve added no new policies at its December meeting, and made no changes to existing ones. It re-iterated its plan to leave the Fed Funds Rate within its current range of 0.000-0.250 percent “at least until mid-2013″ and re-affirmed “Operation Twist” — the stimulus program through which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.
Mortgage bonds are mostly unchanged since the Fed’s announcement, giving mortgage rates in Lake Geneva real estate little reason to rise or fall.
Mortgage rates remain near all-time lows and, for homeowners willing to pay points + closing costs, 30-year fixed rate mortgages can be locked at less than 4 percent. If you’re thinking of buying or refinancing a home, it’s a good time to lock a mortgage rate.
The FOMC’s next meeting will be its first scheduled meeting of the new year. The meeting is slated for January 24-25, 2012.
A Simple Explanation Of The Federal Reserve Statement (November 2, 2011 Edition)
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Wednesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.
The vote was nearly unanimous, with just one dissenting voter. There were 3 dissenters at each of the FOMC’s last two meetings.
In its press release, the Federal Reserve presented an improved outlook for the U.S. economy, noting that since its last meeting in September, there’s new evidence that the economy “strengthened somewhat” in the third quarter.
One example cited is that consumer and business spending continues to rise while inflationary pressures on the economy remain modest. This indicates controlled growth — a plus in a recovering economy.
The economy remains slowed by a number of factors, though, as noted by the Fed :
- “Continuing weakness” in the labor market
- Softness in commercial real estate
- A “depressed” housing market
In response to mixed economic conditions, the FOMC opted to “do nothing” today; it introduced no new monetary policy, and revised none of its existing market stimulus. The Fed re-iterated its plan to leave the Fed Funds Rate in its current range near 0.000 percent “at least until mid-2013″ and affirmed “Operation Twist” — the program in which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.
Mortgage market reaction to the FOMC statement has been negative this afternoon. Mortgage rates throughout Wisconsin are rising because analysts expected the Fed to launch new, bigger stimulus plans. It didn’t. Rates may drift higher for the new few days, too.
Therefore, it today’s mortgage rates fit your household budget, consider locking in a mortgage rate. Mortgage rates are very low right now, relative to history. It may not last.
The FOMC’s next meeting — its last scheduled meeting of the year — is December 13, 2011.
Make Your Mortgage Rate Strategy : The Federal Reserve Starts A 2-Day Meeting
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The Federal Open Market Committee begins a scheduled, 2-day meeting today, the seventh of its 8 scheduled meetings this year, and the eighth Fed meeting overall.
The FOMC is a 12-person sub-committee within the Federal Reserve. It’s the group responsible for setting the nation’s monetary policy and is led by Federal Reserve Chairman Ben Bernanke.
The FOMC’s most well-known role is as the steward of the Fed Funds Rate. This is the overnight rate at which U.S. banks borrow money from each other. The Fed Funds Rate is a unique, “banking” interest rate, and should not be confused with consumer interest rates, a category which includes ”mortgage rates”.
Mortgage rates are not set by the Federal Reserve.
Rather, mortgage rates are based on the price of mortgage-backed bonds. If mortgage rates correlated to the FOMC’s Fed Funds Rate, the chart at right would be linear.
That said, the FOMC does exert influence on mortgage markets.
After its FOMC meetings, the Federal Reserve issues a press release to the public. In it, the central banker summarizes economic conditions nationwide, highlighting threats to the economy and areas of strength.
When the Federal Reserve’s statement is generally “positive”, mortgage rates tend to rise. This is because a strengthening economy invites investors to assume more risk, spurring equity markets at the expense of all bonds types, including the mortgage-backed kind.
When bond markets lose, mortgage rates rise.
Conversely, when the Fed is generally negative, bond markets gain, pushing mortgage rates lower throughout Wisconsin.
The Fed can also influence mortgage rates via new policy.
At its last meeting, the FOMC launched a new, $400-billion round of mortgage-market stimulus known as Operation Twist. The added mortgage-bond support led mortgage rates lower post-FOMC meeting.
The Fed may expand Operation Twist as soon as Wednesday afternoon. It may also take no such steps at all. Unfortunately, there are few clues about what the Federal Reserve may do next, if anything at all. As a result, mortgage rates will be a moving target for the next 36 hours. First, they’ll be volatile before of the Fed’s statement. Then, they’ll be volatile after the Fed’s statement.
Even if the Fed does nothing, mortgage rates will change so your safest play is to lock a mortgage rate ahead of Wednesday’s 2:15 PM ET adjournment.
There too much risk in floating.